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Who can get a mortgage?

Not everyone can get a mortgage, but there are several types of deals that try to cater to a wide variety of people and circumstances.

Generally speaking, mortgages are most accessible to people aged between 25 and 40, who have a larger than average and reliable income, a sizeable amount of savings to use as a deposit and a healthy credit rating.

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It is quite uncommon to be able to match up perfectly with every area of that criteria, but thankfully there are many specialist mortgage providers who try to cater to those who may be deemed ‘too old’ to get a mortgage, or who may not have enough income, deposit or a good enough credit rating for many of the mainstream lenders.

Can I get a mortgage?

There are a number of factors that banks and mortgage lenders will consider about you before they approve or decline your application.

These include, but are not limited to:

  • Your age (and how old you will be by the time you finish paying off the mortgage)
  • Your income (and how secure your job is)
  • The size of your deposit
  • How good your credit score is

These factors, if your application is eventually approved, will also determine how much you will be allowed to borrow, and at what kind of low interest rate deal.

Mortgage lenders are essentially assessing the risk of you borrowing such a large amount from them. They are asking themselves how long will it take for you to repay the debt, and how reliable will you be in making sure that they receive all of the monthly payments on time and in full over the next 25 to 30 years.

Is my credit score good enough for a mortgage?

Your credit report and score is a big clue to helping the banks and mortgage lenders answer those questions. It reveals many of your interactions with financial products, such as loans, credit cards, overdrafts, and even things like utility bill and mobile phone contracts.

They reveal which financial products you have applied for, which debts you have recently paid, how much credit you have at your disposal, and even which debts you have not paid.

Accumulated, these details reveal your credit score and if you have any negative marks on your file. The lower your score, the less likely a bank or lender will trust you with a mortgage.

You receive a lower score for having negative interactions with financial products, such as missing a payment, defaulting on a loan or applying for too many credit cards and loans within a short period of time.

Similarly, you are more likely to receive a higher score for paying your debts on time.

Separately, your credit score will be severely damaged if you are not registered on the electoral roll at your address. Nearly all lenders will reject your application on this basis.

Am I too old to get a mortgage?

You might be considered too old to get a mortgage if you are over 50 years old. Your chances of being approved will generally go down as go past 40 and continue to get older.

That’s because a mortgage generally takes around 25 to 30 years to complete. Lenders want to be sure that you will be able to finish all of your monthly mortgage repayments before you die.

However, there are ways to improve your chances of getting a mortgage if you are over 50.

First of all, if you have saved up a large amount of money, you could put it towards your deposit and therefore decrease your LTV (loan to value) ratio. Obviously, the more mortgage you have to pay, the longer your repayment plan will be.

Increasing the amount you pay upfront will reduce your LTV, and therefore the time it will take for you to repay your mortgage.

If your credit score is in good shape and your mortgage term is shorter than the usual 25 years or so, then you may still have a good chance of being approved, even at 50 years old.

Some lenders specialise in mortgages for over 50s, and also for mortgages for over 60s. Their financial assessments and checks are tailored to dealing with older customers, and therefore can give your application a better chance of being considered for approval.

Can I get a mortgage with bad credit?

If you have bad credit or a low credit score, then your chances of getting a mortgage are really slim.

Some mortgage brokers and providers may include options for people who have a less than perfect rating, but they are still keen to avoid any risk.

The best you can do if you have bad credit is to spend a few months improving your score. You can do this by repaying any debts that you currently have, and ensuring that you are registered on the electoral roll at your address.

Another way to improve your credit score is to have some form of credit that you can regularly pay back. This takes time, but it will show that you can be trusted with debt.

Some credit card companies offer ‘bad credit’ credit cards, which have low credit limits and high interest rates to reduce yours and their risk. However, these credit cards are easier to obtain even if you have a bad credit report, and can still help you improve your score.

How much can I borrow?

Generally, you should be able to borrow four to five times your income on a mortgage. This amount could be far lower depending on your credit rating, but also it could be determined by your financial circumstances.

Since the 2008 recession, new regulations have forced banks and lenders to do extra checks and stress tests on mortgage applications.

If your everyday spending – be it on shopping, TV subscriptions or anything else – is considered too high, then they might see that, despite your salary, you might not be able to repay your mortgage every month.

The amount you can borrow might also depend on your age. As stated previously, the more you borrow, the longer it will take to repay it, and those aged 50 and over are at a disadvantage in the eyes of mortgage lenders.

Some housing schemes in the UK will allow you to borrow at a 95% LTV, which can take around 40 years to pay back. As a result, these schemes are mostly aimed at people aged between 25 and 30.

Remember, interest rates are likely to be higher if you borrow more, so the aim should be to put up as much of a cash deposit as possible to reduce your LTV ratio, the time it takes to repay the mortgage, and to reduce your interest.

Read more…

  • Getting a mortgage when you’re older – Once you’re over 50 your mortgage options begin to change, so it’s worth carefully considering your options.
  • What size mortgage can I get? – Finding the right size of mortgage you can get before you start house hunting is a sensible move to help you set your budget.
  • First-time buyers – Buying your first home can be both exciting and daunting, but thoroughly planning your finances can keep you on track.
  • How to get a mortgage – To get a mortgage you need to have at least a 5% deposit for a home as well as meeting affordability criteria with a lender.

 

Compare first time buyer mortgages

Compare a huge range of first time buyer mortgages on our comparison tables

First time buyer mortgages